These three central banks are getting ready to compete in the digital space

These three central banks are getting ready to compete in the digital space

By fklivestolearn | Technicity | 21 Feb 2020


Sweden’s Riksbank & Central Bank of Brazil (BCB) are launching their respective CBDC and digital payment platform

 

There has been a lot of talk around Central bank digital currencies (CBDCs) lately. The launch of the Libra digital payment coin by Facebook last summer has perhaps been the single biggest catalyst for central banks to think seriously about not leaving the field empty for decentralized cryptos or private corporations like the big techs to compete. The central financial authorities are in no mood to relinquish monetary control unless of course they are forced out.

Most of the conversations have been centered around China’s digital currency electronic payment (DCEP) and the most recently launched Digital Dollar Project by the ex-CFTC (US) chairman. The two largest economies are finally coming around the idea — China more so than the U.S. The Federal Reserve has also been making overtures about looking into digital currency alternatives.

The issue has moved out of the boardroom discussions to implementing practical scenarios. This sentiment was echoed in the recently concluded World Economic Forum (WEF) meeting in Davos, where WEF’s experts along with the world’s major central banks came together to create a CBDC policymaker toolkit.

Digital Yuan by China is perhaps the most sought after CBDC right now but the details on the project are not that cohesive and kept under the veil of secrecy as has been the tradition of Chinese authorities. However, some of the other smaller players seem all set to introduce their digital currencies in the current year.

Governor of the Central Bank of the Bahamas (CBOB) recently announced the launch of the Bahamian digital dollar — a CBDC which will eventually be introduced across all the islands in the second half of 2020. The pilot for the initiative was rolled out on the island of Exuma last December. According to the report, 1,200 persons who signed up for the pilot in Exuma, while there are a further 2,000 who have expressed interest in participating in the initiative there.

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The ripest candidate for digital currency in the World is Sweden, which is rapidly becoming a cashless society (chart above) — only about 10% of the population using cash. Sweden is one of the very few developed countries that is actively looking into introducing a CBDC called e-krona, a digital alternative to its fiat currency.

Sweden’s Central bank, Riksbank, which is the oldest central bank in the World started the project in March 2017 to see if the option of having an electronic form of payment to complement Cash would be feasible. The project is now entering its final stages after the beginning of the pilot which is slated to last till February 2021 at which point e-krona would be made available for public use.

“Pix came from a need for people to have a payment instrument that is both cheap, fast, transparent and secure, If we think about what has happened in terms of the creation of Bitcoin, cryptocurrencies and other encrypted assets, it comes from the need to have an instrument with such characteristics.”

BCB President Roberto Campos

Another notable addition to this list is the biggest Latin American economy of Brazil. Although not really a CBDC in the stricter sense, the newly announced Instant Payment Scheme (PIX) will offer flexibility, convenience, and competition for peer-to-peer (P2P) and business-to-business (B2B) transactions — essentially in 10 seconds or less via smartphone, internet banking, or select ATMs.

The press release states that a 24/7/365 system would execute transactions using a QR Code or by entering simple information such as cell phone number, email or taxpayer-identification. According to the agreement reached between BCB and National Treasury Secretariat, Brazilian citizens will be able to pay federal taxes using PIX from November 2020. Similarly, the central government intends to use PIX to issue income tax refunds, social benefits, grants, etc.

Digitization of the financial system is taking place, one way or another. Central banks are just playing a catching up game to avoid being left in the dust.

 

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fklivestolearn
fklivestolearn

Prolific Blogger on Medium with my own publication Technicity. Extensive trading experience in Forex & Stocks based on technical studies. Cryptocurrency trader and Enthusiast, Blockchain/Fintech Evangelist & generally just a Technology Freak.


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